TEO - A Profit Overview for February, March 2012

Transcription

1 TEO LT, AB CONSOLIDATED INTERIM FINANCIAL STATEMENTS FOR THE THREE MONTHS PERIOD ENDED 31 MARCH 2012 (UNAUDITED)

2 Beginning of the financial year 1 January 2012 End of reporting period 31 March 2012 Name of the company TEO LT, AB (hereinafter TEO or the Company ) Legal form public company (joint-stock company) Date of registration 6 February 1992 Code of enterprise Name of Register of Legal Entities Registered office State Enterprise Centre of Registers Lvovo str. 25, LT Vilnius, Lithuania Telephone number Fax number Internet address Main activities Integrated telecommunication, IT and TV services to residential and business customers in Lithuania TEO LT, AB CONSOLIDATED FINANCIAL STATEMENTS FOR THE 3 MONTHS PERIOD ENDED 31 MARCH

3 TABLE OF CONTENT MANAGEMENT REPORT... 4 CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME CONSOLIDATED BALANCE SHEET CONSOLIDATED STATEMENT OF CHANGES IN EQUITY CONSOLIDATED STATEMENT OF CASH FLOW NOTES TO THE FINANCIAL STATEMENTS Accounting policies Segment information Property, plant and equipment and intangible assets Investments in subsidiaries and associates Share capital and treasury shares Income tax Earnings per share Dividends per share Related party transactions MANAGEMENT CONFIRMATION OF THE CONSOLIDATED FINANCIAL STATEMENTS TEO LT, AB CONSOLIDATED FINANCIAL STATEMENTS FOR THE 3 MONTHS PERIOD ENDED 31 MARCH

4 MANAGEMENT REPORT Management s comment on financial results for the 3 months of 2012: Despite uncertainties in the economy, TEO produced good result in the first quarter of TEO revenue during the first three months increased by 2.5 per cent compared to the same period in Operating expenses were somewhat higher than a year ago, mostly due to non-recurring items. Revision of product pricing in 2011 and 2012 had positive result: revenue from Internet services increased by 4.5 per cent and from TV services by 23.8 per cent, mostly driven by the intake of customers of the nextgeneration fiber-optic network and IPTV services respectively. Internet customer base increased by 6 per cent, while number of IPTV service users was up by 17 per cent. Loss of voice revenue pace did not increase substantially and was fully compensated by the increase in IT services revenue. TEO capital investments during the first quarter of 2012 amounted to LTL 23 million and were higher by 57 per cent compared to the same period in KEY FIGURES OF TEO GROUP January March Financial figures Change (%) Revenue (LTL thousand) 190, , EBITDA (LTL thousand) 74,396 73, EBITDA margin (%) Operating profit (LTL thousand) 42,044 41, Operating profit margin (%) Profit before income tax (LTL thousand) 42,416 41, Profit before income tax margin (%) Profit for the period (LTL thousand) 37,147 37,731 (1.5) Profit for the period margin (%) Earnings per share (LTL) Number of shares excluding treasury stocks (thousand) 776, ,818 Financial ratios 31 March March 2011 Return on capital employed (%) Return on average assets (%) Return on shareholders equity (%) Gearing ratio (%) (24.0) (25.1) Debt to equity ratio (%) Current ratio (%) Rate of turnover of assets (%) Equity to assets ratio (%) Operating figures 31 March March 2011 Change (%) Number of fixed telephone lines in service 636, ,562 (6.4) Number of broadband Internet connections (DSL, FTTB, FTTH, WiFi and other) 373, , Number of TV services customers 154, , Number of personnel (head-counts) at the end of period 3,251 3,368 (3.5) Number of full-time employees at the end of the period 2,833 2,949 (3.9) TEO LT, AB CONSOLIDATED FINANCIAL STATEMENTS FOR THE 3 MONTHS PERIOD ENDED 31 MARCH

5 BREAKDOWN OF TEO GROUP REVENUE January - March Change (%) Voice telephony services 86,662 96,959 (10.6) Internet services 41,276 39, Data communication and network capacity services 22,265 23,196 (4.0) TV services 13,733 11, IT services 19,566 9, Other services 6,990 5, Total 190, , REVENUE The total consolidated TEO Group s revenue in January-March of 2012 was LTL 190 million, an increase by 2.5 per cent over the total revenue of LTL 186 million in the first three months of Revenue from Internet, TV, IT and other services continued to grow while revenue from voice telephony, data communication services and network capacity sales went down. From 2012 the Company will report revenue from Internet services separately from revenue from data communication services and network capacity services: 12 months of 2010 Q Q Q Q months of 2011 Q Internet services 159,236 39,496 38,990 39,764 42, ,697 41,276 Data communication and network capacity services 97,608 23,196 23,035 22,695 23,332 92,258 22,265 Former Internet and data communications services 256,844 62,692 62,025 62,459 65, ,955 63,541 Share of revenue from voice telephony services continued to shrink and from total amount of revenue amounted to 45.5 per cent. Revenue from Internet services amounted to 21.7 per cent, data communications services and network capacity sales 11.7 per cent, television services 7.2 per cent, IT services 10.3 per cent and other services 3.7 per cent of total revenue for the first quarter of Revenue from voice telephony services decreased due to decreased number of telephone lines in service, lower traffic volume and lower average revenue per user (ARPU). During January-March 2012, the total number of main telephone lines in service decreased by 11.4 thousand, while over the last twelve months by 43.4 thousand lines. Lower number of voice telephony service users resulted in decrease of revenue from subscription fees in January-March 2012 by 9.1 per cent compared with the same period a year ago. Total voice telephony traffic volume generated by residential and business customers decreased by 11.8 and 8.9 per cent, respectively. As a result, revenue from traffic charges went down by 10.4 per cent. TEO LT, AB CONSOLIDATED FINANCIAL STATEMENTS FOR THE 3 MONTHS PERIOD ENDED 31 MARCH

6 Revenue from networks interconnection services decreased by 12.7 per cent due to lower termination and international transit prices. During January-March 2012, the total number of broadband Internet access users increased by 1.7 thousand, while over the last twelve months by 21.2 thousand. Number of Internet connections over the next-generation fiber-optic network using FTTH (Fiber to the home) and FTTB (Fiber to the building) technologies continued to grow and by the end of March 2012, 39.2 per cent of the total number of TEO broadband Internet access users had fiber-optic access. Over the year the number of FTTH and FTTB connections increased by 29.4 per cent, while the number of copper DSL connections went down by 7.8 per cent. At the end of March 2012 out of total 374 thousand broadband connections, 193 thousand were copper DSL connections, 147 thousand fiber-optic connections and 34 thousand wireless connections via WiFi network. From the 1st of March, TEO increased the speed of the ZEBRA Internet plans "Startas" ("Start") from 1 up to 2 Mbps and "Bazinis šviesolaidis" ("Basic FTTH") from 40 up to 50 Mbps, and consequently increased monthly fees for the Internet plans "Start", "Basic Plus" and "Basic FTTH" by 3 litas. In March, the Company offered two new additional services. The ZEBRA Internet service "Saugykla" ("Storage"), an online data storage service, enables storing up 300 GB of data on a highly secure server. The new service allows keeping important data safe in the event of a computer failure or theft. The service "Laiko kontrolė" ("Time Control") helps Internet users plan their children's leisure time to limit the time they can spend on the Internet. The service allows users to set a specific time when their Internet access will be limited. The new services are available for use to the majority of TEO customers at no extra charge for one year (the standard price for the each of the services is 4.90 litas per month). During January-March 2012 the total number of television services users increased by 3.1 thousand, while over the last twelve months by 15.8 thousand. Over the year the number of IPTV service users went up by 12.1 thousand and by the end of March 2012 reached 82.9 thousand. As of 31 March 2012, the number of digital terrestrial television (DVB-T) users amounted to 71.4 thousand. Consolidated TEO Group revenue from IT services was mainly generated by the Company s subsidiary UAB Baltic Data Center that provides data center and information system management services to local and multinational enterprises. During the first quarter of 2012 Baltic Data Center recorded one-off sales of IT equipment which contributed to double growth of revenue from IT services. In January TEO launched long-term computer and office equipment rental services for businesses and organizations. Customers are able to rent equipment presented on the website which contains several hundreds of laptops, tablets and desktops, servers, printers, monitors and other computer accessories, for 2 or 3 years, and later rent or purchase new equipment. TEO Group revenue from other services consists of the following non-telecommunication services: Contact Center services of UAB Lintel, lease of premises, advertising, fines for termination of agreements and other. Over the year revenue from Contact Center services declined by 0.8 per cent, while revenue from other noncore business services increased by 57.4 per cent. In March 2012, TEO signed an agreement on the transfer of its entertainment news Internet portal Zebra.lt. to UAB "15 min", owned by the media group Schibsted ASA. According to the agreement, "15 min" took over the news portal and its management from TEO and will use the brand name and the Internet domain Zebra.lt. The portal is one of the most popular entertainment news portals in Lithuania, with particular emphasis on celebrity life and entertainment news. The portal has on average 450 thousand unique visitors per month. TEO LT, AB CONSOLIDATED FINANCIAL STATEMENTS FOR THE 3 MONTHS PERIOD ENDED 31 MARCH

7 TEO Group s other income consists of interest income from investments held to maturity. Gain or loss from sale of property, plant and equipment, as well as gain or loss on currency exchange is recorded at net value as other gain (loss). MARKET INFORMATION According to the Reports of the Communications Regulatory Authority (CRA), the Lithuanian electronic communications market in terms of revenue in the fourth quarter of 2011 decreased by 4 per cent to LTL 604 million, compared with the same period a year ago, while during the 12 months of 2011 it went down by 7 per cent to LTL 2,394 million. TEO market share in terms of customers (%) TEO market share in terms of revenue (%) Q Q Q Q Fixed voice telephony services Data communication services n/a n/a Leased line services n/a n/a Internet access services (total) Fixed Internet access services Pay-TV services (total) Digital pay-tv services Network interconnection services n/a n/a On 31 December 2011 Internet penetration per 100 residents of Lithuania was 30.9 per cent (in per cent), while the penetration of broadband Internet using fixed connection was 22.9 per cent (21.1 per cent a year ago). Digital pay-tv penetration per 100 households was 25.2 per cent (in per cent), and the penetration of fixed voice telephony lines per 100 residents 21.7 per cent (22.6 per cent a year ago). OPERATING EXPENSES In 2012, the Company changed the grouping of operating expenses for reporting purpose: direct services expenses and network capacity costs were moved from other expenses and together with former separate interconnection expenses formed a new group of cost of goods sold. Employee-related expenses remained unchanged as well as total operating expenses for the previously reported periods: 12 months of 2010 Q Q Q Q months of 2011 Q Cost of goods sold 210,283 48,265 48,146 49,322 55, ,961 50,562 Employee-related expenses 157,647 40,407 37,741 37,279 41, ,809 46,069 Other expenses 97,038 23,430 21,448 21,542 25,038 91,458 20,085 Total operating expenses 464, , , , , , ,716 Total operating expenses of the Group for the first quarter of 2012 were by 4.1 per cent higher than total operating expenses a year ago. During the first three months of 2012 cost of goods sold increased by 4.8 per cent, compared with the same period in 2011, mainly due to one-off sales of IT equipment by Baltic Data Center, while interconnection expenses continued to go down due to lower transit traffic prices and reduced national interconnection tariffs following the regulatory requirements. TEO LT, AB CONSOLIDATED FINANCIAL STATEMENTS FOR THE 3 MONTHS PERIOD ENDED 31 MARCH

8 Employee-related expenses increased by 14 per cent due to paid bonuses. Over the year the total number of employees (headcount) in TEO Group decreased by 117 (mainly in Lintel) from 3,368 to 3,251. During the first quarter of 2012, the total number of employees went down by 52. In terms of full-time employees, the total number of employees in TEO Group during January-March of 2012 went down by 95 (mainly in Lintel), while over the last twelve months by 116 from 2,949 to 2,833. Other expenses decreased by 14.3 per cent due to lower expenses for marketing, bad debts and business trips. EARNINGS EBITDA for the first three months of 2012 went up by 0.7 per cent to LTL 74.4 million over LTL 73.9 million in the first three months of EBITDA margin amounted to 39.1 per cent (39.8 per cent in 2011). Depreciation and amortisation charges remained almost the same (a decline by 0.2 per cent) due to investments in In January-March of 2012 depreciation and amortisation charges amounted to 17 per cent of total revenue (17.5 a year ago). Operating profit (EBIT) was by 1.4 per cent higher than a year ago and the operating profit margin declined from 22.3 per cent a year ago to 22.1 per cent. Net financial income in January-March of 2012 was by 2.3 per cent lower than year ago. Profit before income tax in the first three months of 2012 was up by 1.4 per cent and amounted to LTL 42.4 million (LTL 41.8 million a year ago). Since 1 January 2010 the profit tax rate in Lithuania is 15 per cent. Following the provisions of the Law on Corporate Profit Tax regarding tax relief for investments in new technologies, the profit tax relief for the first quarter of 2012 amounted to LTL 1.2 million (LTL 2.3 million in 2011). Due to that income tax expenses for the first three months of 2012 were by 28 per cent higher than a year ago. As a result, profit for the period amounted to LTL 37.1 million, while a year ago it was LTL 37.7 million, a decline by 1.5 per cent. The profit margin was 19.5 per cent (20.3 per cent a year ago). BALANCE SHEET AND CASH FLOW During January March 2012 total assets of TEO Group increased by 3.8 per cent due to increase of current assets. The total non-current assets decreased by 1.2 per cent and amounted to 66.6 per cent of the total assets. The total current assets increased by 15.4 per cent and amounted to 33.4 per cent of the total assets, whereof cash and held-to-maturity investments alone represented 22.2 per cent of the total assets. Shareholders equity increased by 3.6 per cent and amounted to 91.3 per cent of the total assets. The Board of the Company proposed to the Annual General Meeting of Shareholders that will be held on 24 April 2012 to pay dividend of LTL 0.20 per share (in total LTL 155 million) for the year Dividends paid to legal entities (residents and non-residents) will be subject to withholding Corporate income tax of 15 per cent and dividends paid to natural persons (residents and non-residents) will be subject to withholding Personal income tax of 20 per cent. At the end of March 2012 the total amount of borrowings included mainly financial liabilities related to finance leasing of premises and amounted to LTL 4 million. Net debt was negative and amounted to LTL 256 million. The net debt to equity ratio was negative and amounted to 24 per cent. TEO LT, AB CONSOLIDATED FINANCIAL STATEMENTS FOR THE 3 MONTHS PERIOD ENDED 31 MARCH

9 Net cash flow from operating activities in the first three months of 2012 increased by 5.9 per cent over the net cash flow from operating activities a year ago. The part of cash (LTL 10.4 million) spent during January-March of 2012 for capital investments was payments for investments made in As of 31 December 2011 this amount was recorded in the balance sheet as current liabilities. During the first three months of 2012 capital investments amounted to LTL 23 million, an increase by 57.5 per cent over capital investments of LTL 14.6 million a year ago. The majority of capital investments (66 per cent or LTL 15.1 million) went to expansion of the core network and development of the next-generation fiberoptic access network. An amount of LTL 6.9 million (30 per cent of total capital investments) was invested into IT systems. The remaining part was invested into transportation and other. As a result, by the end of March 2012, TEO had 714 thousand households passed (579 thousand a year ago), or 59 per cent of the country s households, by the FTTH network. Due investments of free cash into held-to-maturity investments, cash and cash equivalents during the period of the first three months of 2012 decreased by LTL 27 million. SHARE CAPITAL AND SHAREHOLDERS The share capital of the Company amounts to 776,817,518 litas and consists of 776,817,518 ordinary registered shares with a nominal value of 1 litas each. It was reduced from 814,912,760 litas to 776,817,518 litas and registered at the Register of Legal Entities on 3 September 2010 following the decision of the Annual General Meeting of Shareholders, held on 26 April 2010, to cancel 38,095,242 treasury stocks and to reduce the Company s authorised share capital by 38,095,242 litas. Treasury stocks were cancelled on 9 September The number of TEO shares that provide voting rights during the General Meeting is 776,817, ,817,518 ordinary registered shares of TEO LT, AB (ISIN code LT ) are listed on the Main List of NASDAQ OMX Vilnius stock exchange (code: TEO1L). NASDAQ OMX Vilnius stock exchange is a home market for TEO shares. In January 2011, TEO ordinary shares were included into the trading lists of the Berlin Stock Exchange (Berlin Open Market (Freiverkehr), the Frankfurt Stock Exchange (Open Market (Freiverkehr), the Munich Stock Exchange and the Stuttgart Stock Exchange. TEO share s symbol on German stock exchanges is ZWS. Information about trading in TEO shares on NASDAQ OMX Vilnius stock exchange in January-March of 2012: Currency Opening price Highest price Lowest price Last price Average price Turnover (units) Turnover LTL ,155,012 13,638,320 EUR ,155,012 3,949,931 TEO market capitalisation as on 31 March 2012 was LTL 1,717 million (EUR 497 million). The number of shareholders on the shareholders registration day for the Annual General Meeting of Shareholders, which was held on 28 April 2011, was 14,530. TEO LT, AB CONSOLIDATED FINANCIAL STATEMENTS FOR THE 3 MONTHS PERIOD ENDED 31 MARCH

10 Shareholders, holding more than 5 per cent of the share capital and votes, as on 31 March 2012: Name of the shareholder (name of the enterprise, type and registered office address, code in the Register of Enterprises) TeliaSonera AB, Stureplan 8, Stockholm, SE , Sweden, code East Capital Asset Management AB, Kungsgatan 33, Stockholm, SE , Sweden, code Number of ordinary registered shares owned by the shareholder Share of the share capital (%) Share of votes given by the shares owned by the right of ownership (%) Share of votes held together with persons acting in concert (%) 530,504, ,651, Other shareholders 189,661, TOTAL: 776,817, In June 2011 TeliaSonera AB took over from its subsidiary Amber Teleholding A/S the controlling interest in TEO (62.94 per cent of shares and votes). Before the transaction TeliaSonera AB directly held 5.14 per cent of the Company s shares and votes. During the third quarter of 2011 TeliaSonera AB additionally acquired 1,661,566 shares (0.21 per cent of the total number of share) and increased its holding up to per cent. As of 31 March 2012, Republic of Lithuania, represented by State Tax Inspectorate, held 362,865 shares or 0.05 per cent of the Company s share capital and votes. OTHER MATERIAL INFORMATION On 21 March 2012 the Board decided to convoke the Annual General Meeting of Shareholders on 24 April The Board proposed to the shareholders from the Company s distributable profit of LTL 161,163 thousand to allocate LTL 155,364 thousand for the dividend payment for the year 2011 or LTL 0.20 dividend per share. For annual payments (tantiemes) to six members of the Board for the year 2011 to allocate LTL 324 thousand, i.e. LTL 54 thousand per one member of the Board. The Board also proposed to the shareholders to elect UAB PricewaterhouseCoopers as the Company s audit enterprise for the period of two years to perform the audit of the annual consolidated financial statements of the Company for the year 2012 and 2013, and to make the assessment of the consolidated annual reports of the Company for the year 2012 and MEMBERS OF THE MANAGING BODIES According to the By-laws of TEO LT, AB the managing bodies of the Company are General Meeting, Board and General Manager. The Company does not have a Supervisory Council. The Annual General Meeting of Shareholders, held on 28 April 2011, decided to reduce the number of members of the Board from seven to six. TEO LT, AB CONSOLIDATED FINANCIAL STATEMENTS FOR THE 3 MONTHS PERIOD ENDED 31 MARCH

11 Members of the Board as of 31 March 2012: Name, surname Position in the Board Employment Malin Frenning Lars Klasson Joakim Sundström Tiia Tuovinen Inga Skisaker Jonas Pilkauskas Chairwoman of the Board, member of the Remuneration Committee Member of the Board, member of the Remuneration Committee Member of the Board, Chairman of the Audit Committee Member of the Board, member of the Audit Committee Member of the Board, member of the Audit Committee Member of the Board, member of the Remuneration Committee TeliaSonera AB (Sweden), President of Business Area Broadband Services TeliaSonera AB (Sweden), Business Area Broadband Services, Chief Technology Officer TeliaSonera AB (Sweden), Business Area Broadband Services, Vice President of Business Control TeliaSonera Finland Oyj (Finland), General Counsel for Broadband Services and Vice President for Real Estates and Property Planning in Finland Nordea Bank Finland Plc Lithuania Branch, General Manager Law firm TARK GRUNTE SUTKIENĖ, of counsel Ownership of TEO shares Following provisions of The Governance Code for the Companies Listed on NASDAQ OMX Vilnius stock exchange, all members of the Board are regarded as non-executive members of the Board, and Inga Skisaker and Jonas Pilkauskas are regarded as independent members of the Board. Information about other Board assignments of the members of the Company s Board is provided on the Company s webpage Members of Administration: Name, surname Position in the Company Current Board Assignments Arūnas Šikšta General Manager (CEO) AB Žemaitijos Pienas (Lithuania), member of the Board; Big Brothers Big Sisters International, (U.S.A.), member of the Board Darius Gudačiauskas Nerijus Ivanauskas Darius Didžgalvis Chief Sales Officer and Deputy General Manager Chief Marketing Officer and Deputy General Manager Chief Technology Officer and Deputy General Manager UAB Lintel, a subsidiary of TEO LT, AB, Chairman of the Board Ownership of TEO shares - - UAB Baltic Data Center, a subsidiary of TEO LT, AB, Chairman of the Board; UAB Hostex, a subsidiary of UAB Baltic Data Center, Chairman of the Board; UAB Interdata, a subsidiary of UAB Hostex, Chairman of the Board Eglutė Bivainienė Chief Operational Officer - - Giedrius Vegys Chief Financial Officer UAB Baltic Data Center, a subsidiary of TEO LT, AB, member of the Board TEO LT, AB CONSOLIDATED FINANCIAL STATEMENTS FOR THE 3 MONTHS PERIOD ENDED 31 MARCH

12 CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME January - March Note Revenue 190, ,782 Cost of goods sold (50,562) (48,265) Employee-related expenses (46,069) (40,407) Other expenses (20,085) (23,430) Other income Other gain/ (loss) - net Depreciation, amortisation and impairment of fixed assets 3 (32,352) (32,430) Operating profit 42,044 41,466 Finance income Finance costs (163) (190) Finance income/ costs - net Profit before income tax 42,417 41,848 Income tax 6 (5,270) (4,117) Profit for the period 37,147 37,731 Other comprehensive income: Other comprehensive income for the period - - Total comprehensive income for the period 37,147 37,731 Profit and comprehensive income attributable to: Owners of the Parent 37,147 37,731 Minority interests - - Earnings per share for profit attributable to the equity holders of the Company (expressed in Litas per share) TEO LT, AB CONSOLIDATED FINANCIAL STATEMENTS FOR THE 3 MONTHS PERIOD ENDED 31 MARCH

13 CONSOLIDATED BALANCE SHEET Note 31 March December 2011 ASSETS Non-current assets Property, plant and equipment 3 727, ,926 Intangible assets 3 40,808 42,922 Investment property 10,794 10,794 Trade and other receivables 6,636 6,407 Deferred tax assets , ,632 Current assets Inventories 5,385 3,353 Trade and other receivables 123, ,834 Current income tax receivable 3,804 8,096 Held-to-maturity investments 101,319 30,186 Cash and cash equivalents 161, ,589 Assets held for sale 1-394, ,058 Total assets 1,181,091 1,137,690 EQUITY Capital and reserves attributable to equity holders of the Company Share capital 5 776, ,818 Legal reserve 77,682 77,682 Retained earnings 223, ,597 Total equity 1,078,244 1,041,097 LIABILITIES Non-current liabilities Borrowings 3,019 3,259 Deferred tax liabilities 14,769 13,993 Deferred revenue and accrued liabilities 3,565 3,628 21,353 20,880 Current liabilities Trade, other payables and accrued liabilities 80,518 74,739 Current income tax liabilities 27 - Borrowings ,494 75,713 Total liabilities 102,847 96,593 Total equity and liabilities 1,181,091 1,137,690 TEO LT, AB CONSOLIDATED FINANCIAL STATEMENTS FOR THE 3 MONTHS PERIOD ENDED 31 MARCH

14 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY GROUP Share capital Treasury shares Legal reserve Retained earnings Total equity Balance at 1 January ,818-81, ,121 1,026,438 Net profit ,731 37,731 Total comprehensive income for the period ,731 37,731 Balance at 31 March ,818-81, ,852 1,064,169 Balance at 1 January ,818-77, ,597 1,041,097 Net profit ,147 37,147 Total comprehensive income for the period ,147 37,147 Balance at 31 March ,818-77, ,744 1,078,244 TEO LT, AB CONSOLIDATED FINANCIAL STATEMENTS FOR THE 3 MONTHS PERIOD ENDED 31 MARCH

15 CONSOLIDATED STATEMENT OF CASH FLOW January - March Operating activities Profit for the period 37,147 37,731 Income tax 5,270 4,117 Depreciation, amortisation and impairment of fixed assets 32,352 32,430 Other gains and losses (294) (49) Interest income (530) (572) Interest expenses Other non-cash transactions (148) 101 Changes in working capital: Inventories (2,032) (752) Trade and other receivables (11,487) 11,232 Trade, other payables and accrued liabilities 16,280 (11,677) Cash generated from operations 76,599 72,613 Interest paid (41) (52) Interest received Tax paid (329) (445) Net cash from operating activities 76,966 72,688 Investing activities Purchase of property, plant and equipment (PPE) and intangible assets (33,355) (60,556) Proceeds from disposal of PPE and intangible assets Acquisition of held-to-maturity investments (91,066) (40,000) Disposal of held-to-maturity investments 20,000 31,730 Net cash used in investing activities (104,055) (68,753) Financing activities Repayment of borrowings (266) (314) Net cash used in financing activities (266) (314) Increase (decrease) in cash and cash equivalents (27,355) 3,621 Movement in cash and cash equivalents At the beginning of the year 188, ,526 Increase (decrease) in cash and cash equivalents (27,355) 3,621 At the end of the period 161, ,147 TEO LT, AB CONSOLIDATED FINANCIAL STATEMENTS FOR THE 3 MONTHS PERIOD ENDED 31 MARCH

16 NOTES TO THE FINANCIAL STATEMENTS 1 Accounting policies The consolidated interim financial statements for the three months period ending 31 March 2012 are prepared in accordance with the International Financial Accounting Standards, as adopted by the European Union, includes IAS 34. In all material respects, the same accounting principles have been followed as in the preparation of financial statements for The presentation currency is litas. The financial statements are presented in thousands of litas, unless indicated otherwise. The financial statements are prepared under the historical cost convention. Financial statements for the period ended 31 March 2012 are not audited. Financial statements for the year ended 31 December 2011 are audited by the external auditor UAB PricewaterhouseCoopers. 2 Segment information The Company s management considers the business from the Group s perspective and considers the performance of the Company and each subsidiary separately. The management assesses the performance of the Company and its subsidiaries based on measure of Net profit. The Company s activity is the segment that meets the quantitative thresholds required by IFRS 8 and it is reported as Broadband segment. This segment uses the national fixed telecommunications network to provide fixed voice, broadband and data communications, TV broadcasting services and related value-added services. The Company s subsidiaries do not meet the quantitative thresholds required by IFRS 8. The results of the subsidiaries are combined and disclosed in the other segment column. The profile of each subsidiary is described in Note 4. Broadband segment Other segment Eliminations Total Group January-March January-March January-March January-March Segment revenue 170, ,722 31,261 23,203 (11,039) (13,143) 190, ,782 Inter-segment revenue (2,766) (2,767) (8,273) (10,376) 11,039 13, Revenue from external customers 167, ,955 22,988 12, , ,782 Profit for the period 35,350 36,161 1,797 1, ,147 37,731 Total Assets 1,124,228 1,122, ,507 95,273 (58,644) (59,402) 1,181,091 1,158,715 TEO LT, AB CONSOLIDATED FINANCIAL STATEMENTS FOR THE 3 MONTHS PERIOD ENDED 31 MARCH

17 3 Property, plant and equipment and intangible assets Property, plant and equipment Intangible assets Three months ended 31 March 2011 Opening net book amount as at 31 December ,430 49,341 Additions 14, Disposals and retirements Reclassification (287) 211 Depreciation and amortisation charge 30,093 2,337 Closing net book amount as at 31 March ,019 47,728 Three months ended 31 March 2012 Opening net book amount as at 31 December ,926 42,922 Additions 22, Disposals and retirements Reclassification 29 (16) Depreciation and amortisation charge 29,904 2,448 Closing net book amount as at 31 March ,481 40,808 4 Investments in subsidiaries and associates The subsidiaries included in the Group s consolidated financial statements are indicated below: Subsidiary Country of incorporation Ownership interest in % 31 March December 2011 Profile UAB Lintel Lithuania 100% 100% The subsidiary provides Directory Inquiry Service 118 and Contact Center services. UAB Baltic Data Center Lithuania 100% 100% The subsidiary provides information technology infrastructure services to the Group and third parties. UAB Hostex Lithuania 100% 100% The web hosting and data center services providing subsidiary of UAB Baltic Data Center. UAB Interdata Lithuania 100% 100% The web hosting services providing subsidiary of UAB Hostex (till May 2011 was subsidiary of UAB Baltic Data Center). UAB Hosting Lithuania 100% 100% The dormant subsidiary of UAB Interdata. Baltic Data Center SIA Latvia 100% 100% The dormant subsidiary of UAB Baltic Data Center. TEO LT, AB CONSOLIDATED FINANCIAL STATEMENTS FOR THE 3 MONTHS PERIOD ENDED 31 MARCH

18 UAB Kompetencijos Ugdymo Centras UAB Verslo Investicijos VšĮ Ryšių Istorijos Muziejus Lithuania 100% 100% The dormant subsidiary of the Company. Lithuania 100% 100% The subsidiary for implementation of the investment project. Lithuania 100% 100% A non-profit organisation established by the Company in July 2010 for management of the Company s Communications History Museum. 5 Share capital and treasury shares The authorised share capital comprises 776,817,518 ordinary shares of LTL 1 par value each. All shares are fully paid up. 6 Income tax The tax expenses for the period comprise current and deferred tax. Profit for 2012 is taxable at a rate of 15% in accordance with Lithuanian regulatory legislation on taxation (2011: 15%). According to amendments to the Law on Corporate Profit Tax which provides tax relief for investments in new technologies the Company s calculated profit tax relief in 2012 amounted to LTL 1.2 million (2011: LTL 2.3 million). 7 Earnings per share Basic earnings per share are calculated by dividing the net profit (loss) for the period by the weighted average number of ordinary shares in issue during the period. The Group has no dilutive potential ordinary shares and therefore diluted earnings per share are the same as basic earnings per share. The weighted average number of shares for the both reporting periods amounted to 776,818. January March Net profit 37,147 37,731 Weighted average number of ordinary shares in issue (thousands) 776, ,818 Earnings per share (LTL) Dividends per share A dividend that relates to the period to 31 December 2011 was proposed by the Board on 21 March The total proposed amount is LTL 155,364 thousand or LTL 0.20 per ordinary share. TEO LT, AB CONSOLIDATED FINANCIAL STATEMENTS FOR THE 3 MONTHS PERIOD ENDED 31 MARCH

19 9 Related party transactions The Group is controlled by TeliaSonera AB (Sweden) which as of 31 March 2012 owned per cent of the Company s shares. In June 2011 TeliaSonera AB took over from its subsidiary Amber Teleholding A/S (Denmark) the controlling interest in the Company (62.94 per cent of shares). Before that TeliaSonera AB directly owned 5.14 per cent of the Company s shares. Also TeliaSonera AB additionally acquired 0.21 per cent of the Company s shares. The following transactions were carried out with related parties: Sales and purchases from TeliaSonera AB and its subsidiaries: January - March Sales of telecommunication and other services 10,686 11,325 Total sales of telecommunication and other services 10,686 11,325 Purchases of assets Purchases of services 5,028 5,981 Total purchases of assets and services 5,028 6,241 Balances arising from sales/purchase of assets/services to/from TeliaSonera AB and its subsidiaries: As at 31 March Receivables from related parties 3,362 3,560 Prepayment to related parties 4,715 - Accrued revenue from related parties 3,921 3,551 Total receivables and accrued revenue from related parties 11,998 7,111 Payables to related parties 649 1,257 Accrued expenses to related parties - 1 Total payables and accrued expenses to related parties 649 1,258 For the period ended 31 March 2012 the amount of LTL 51 thousand of interest income was accounted in the Statement of Comprehensive Income as Finance income and the amount of LTL 17 thousand was accounted in the Balance Sheet as Trade and other receivables. The base for calculating interest income was the prepayment to a related party. As of 31 March 2012 the amount of LTL 162 thousand of tantiemes, assigned for the year 2010, was not paid to three members of the Board. TEO LT, AB CONSOLIDATED FINANCIAL STATEMENTS FOR THE 3 MONTHS PERIOD ENDED 31 MARCH

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